I discovered at an early age that one can learn a lot from the Rees-Mogg family. At my Somerset boarding school, one of their number taught me how to smoke – for which I was always very grateful. These days, I’m a big fan of the columns of William Rees-Mogg, the former editor of The Times, who is never afraid to take a long-term view. He did so in The Times this week, in an article warning of the risks to world peace of the decline of the US dollar. “If we look at the most bloody events of modern history,” he wrote, “from the French Revolution and the Terror, the great slump, the rise of the Nazis, the Second World War and the Holocaust, to the 70-year Soviet tyranny, we find the mismanagement of currencies among the main causative factors. Incompetent central bankers are more lethal than incompetent generals. They, too, have their Gallipolis.”
Terrifying stuff – and a view clearly shared by Lord Rees-Mogg’s son, Jacob, who writes this week’s Personal View. He too takes the long view, seeing in the rise of China and India an earthquake shifting the tectonic plates of economic and political power akin to the rise of Alexander the Great. The West, he says, is under greater threat than at any time since Suleiman the Magnificent stood at the gates of Vienna in 1529.
Naturally, I wholeheatedly agree with the Rees-Moggs. But what puzzles me is how little their message seems to be understood by the wider public. How else to expain the 20% rise in the stock market this year, the staggering rise in personal debt and the lack of savings? There is little sign in the markets that people are worrying about the decline of the West. Sure, the gold price is up a bit, but shares are up far more. Last week, the Dow Jones and FTSE hit 18 and 15-month highs. Instead of putting their heads down and learning Mandarin, people in Britain and America are still splashing out on their credit cards. People like me and the Rees-Moggs may look at the borrowing and trade figures and despair, but the rest of the world seems to look at the last quarter’s growth figures and rejoice.
I supect that markets, like human beings, are generally only capable of focusing on one story at a time. Right now investors seem determined to be bullish. Short of something horrendous like a terrorist attack, it is hard to see much shaking this confidence before the middle of next year, when US earnings figures could start to disappoint. Long-term, I have no doubt the Rees-Moggs will be proved right, but who knows when the long-term will come? In the meantime, at least I know how to smoke.